Tax cuts 2.0: What we know so far

Republicans take on tax reform 2.0

FBN’s Kristina Partsinevelos on Republicans’ push for updates to the tax reform legislation.

President Donald Trump met with Republican members of the House Ways and Means Committee on Tuesday to discuss a possible second phase of tax cuts.

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The president said late last month during an interview with FOX Business’ Maria Bartiromo that the administration would “be doing” the new tax package this fall, in October or possibly sooner.

Talks about a second round of tax cuts began in March, House Ways and Means Committee Chair Kevin Brady, R-Texas, told FOX Business, adding that they could be completed before the midterm elections in November.

In the wake of implementation of the tax overhaul, more than 430 companies have announced pay raises, bonuses or 401(k) hikes, benefiting more than 4 million Americans, according to the White House.

But the administration says it can do more. Here’s what we know so far about the second round of tax cuts:

Multiple bills

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Instead of piling all of the provisions into a single piece of legislation, Brady said the second phase of tax reform could be a package of multiple bills.

"I see it as a package of two, three or four approaches with permanency being one of them," Brady said during a Washington Post event.

Middle-class focused

“This will be even more aimed at the middle class,” Trump told FOX Business last month.

While the first tax package reduced the individual tax rates and padded Americans’ wallets, some of those provisions are set to expire in the coming years. Administration officials and key GOP lawmakers have suggested the new tax package could make some of those policies, including recently lowered individual tax rates, permanent.

“That’s very high on everybody’s list and I think you’ll get more bang for the buck on these tax cuts if you do make them permanent,” National Economic Director Larry Kudlow told FOX Business earlier this year.

Brady said that making the tax cuts for families and small businesses permanent is “important for growth and certainty.”

Additionally, Brady has said the GOP can do even more to boost paychecks. Under the Tax Cuts and Jobs Act, the Council of Economic Advisers estimates that annual income for American households will increase in the long run by $4,000 on average.

Lower corporate tax rate?

While the GOP slashed the corporate tax rate by 14 percentage points, to 21% from 35%, under the Tax Cuts and Jobs Act, an even bigger reduction could be on the way.

“One of the things I'm thinking about is bringing the 21% [corporate tax rate] down to 20%,” Trump told FOX Business, adding it would provide “great stimulus.”

Brady said if other countries keep lowering their tax rates, the U.S. will keep pace, adding that the Trump administration wants to make sure the country never again falls behind “like it did for the last 31 years.”

Before the tax overhaul, the U.S. had one of the highest corporate tax rates among countries in the developed world.

Encourage savings

A May report from Northwestern Mutual found that 21% of Americans have no retirement savings at all, while two-thirds of people with a savings account or plan are certain their funds will run dry too soon.

The administration hopes it can help change that with its second round of tax legislation.

“We are looking at ways where it’s easier for families to save earlier in life and more over time, whether it’s for health care or for retirement,” Brady said. “We think America is not a nation of savers; we want it to be.”

Brady did not go into specific details as to what Republicans plan to do to help more Americans stash away a larger percentage of their income, but Rep. Kenny Marchant, R-Texas, told The Wall Street Journal that a universal savings account could be included. Contributions into a universal savings account would be taxed, but earnings would grow tax-free and would be easier to withdraw than a traditional 401(k) or other retirement account.

Further, the bill could aim to make it easier to use health savings accounts (HSA), an account where an individual contributes pretax dollars for the explicit purpose of spending those funds on future medical expenses.

Pensions

The next phase of tax cuts will also focus on pensions, Brady said.

“We want to make sure they’re adequate and they’re secure for the long term,” he said during the interview on FOX Business. “Workers count on that. Businesses count on that to recruit good workers as well.”

Some companies, including Pfizer, have increased contributions to pension plans since the Tax Cuts and Jobs Act was enacted.

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